Submitted by Naomi M on Thu, 10/04/2007 - 03:05.
Probate Property Investing
FYI: Check out 31 Days to Profits in Probate Real Estate
One of the best ways to make money in real estate investing is to buy probate property at a discount - with little competition.
What is probate?
Probate is the process of proving the will of a deceased person is real and confirming the appointment of the person or institution you have names to administer your estate. The probate procedure also makes sure the deceased's debts are paid, heirs are identified and located, and the real and personal property assets are distributed as instructed. Probate proceedings assure that court, attorney, executor/administrator and other costs are paid from the estate's assets.
You many have heard horror stories about probate - taking years to complete while racking up expenses. Well, often those horror stories are true. Although state laws supposedly put limits on estate attorney fees to between 3% and 5% of the estate's value, there are many expenses, which deplete estates - such as accounting fees, property management, estate taxes and property sales costs.
The result? A big opportunity for real estate investors who know how to profit from the distribution of probate assets. Statistics reveal that the opportunities are huge because each year over one million estates are probated and it takes an average of three years to probate an estate. So at any one time, there are over three million estates in the process of probate.
Why you can buy probate property for 20% to 30% below market value?
The estate must of often liquidate real estate to pay expenses, as I outlined above. If the deceased didn't leave sizeable cash assets, the executor or administrator usually must sell assets to pay ongoing costs. The result can be the sale of real estate far below market value for three main, and very motivated reasons:
1. Most heirs prefer cash to receiving real estate
2. The estate usually needs cash to pay expenses and
3. The heirs didn't pay anything for what they inherit, so they often don't demand fair market value. If the net estate is over $1,000,000 (2007 rate) federal estate taxes must be paid, too.
Not all states are equal when it comes to buying probate property
Your goal is to avoid buying at a probate sale, which must be confirmed in Probate Court. Discount pricing is more easily obtained in states that do not require Probate Court confirmation after the probate proceedings are completed. You can negotiate directly with the estate executor or administrator (advised by the estate's attorney) and the heirs. Even when court approval is not required, some estate attorneys and executors or administrators seek Probate Court approval anyway to cover their "you know what. "
So which states are the best ones to buy probate property?
4 ways to buy probate property
[1] Buy the property at a discount from the administrator --- The best way to buy probate property is directly from the estate executor or administrator without court confirmation. The heirs will need to agree to your offer, however they often just want a quick cash sale and are not too concerned about the sales prices - especially if the executor recommends they take the deal. Another thing to keep in mind is that the property is being sold "AS IS," so heirs don't have to spend money to fix up the property.
You can even ask the estate to carry a private mortgage on the property. Often the executor knows it's easier to have a local bank collect and distribute monthly mortgage payments to the heirs than to get an all cash sale.
[2] Buy the property from the heirs after they receive title to the distributed property --- Heirs would rather have cash than property along with the maintenance or fix-up costs that go along with ownership.
[3] Buy the property at a public sale --- Legal notices published in the local paper list property sales. There are a few reasons the property will be listed:
1. The deceased left no will allowing a private property sale
2. The executor or administrator and/or the heirs think a public sale will get a higher sales price
3. Court approval of the sale might be required. The property might be listed with a real estate agent and the highest bid be presented to the Probate Courty for confirmation.
[4] Buy at a public auction --- Sometimes probate property is advertised for sale at public auctions. Be aware that public auctions and sales create more competition and usually a higher sales price that may not be a bargain anymore.
How to profit from your deeply discounted probate property purchase
Now that you've successfully bought your property, how do you profit?
* Keep the property, fix it up and rent it out for long term appreciation and, hopefully, some monthly cash flow. Perhaps you can refinance it after fix-up and pull some cash out to put in your pocket or buy your next property.
* Flip the property for fast cash. You can either sell it after fixing it up for fair market value or sell it "AS IS" to another investor for a smaller profit.
Strategies for success
Whether you are a new to real estate investing or have some experience, to be successful in probate sale property investing, it's always advisable to work with a mentor. You may not have anyone in your immediate area willing to teach you how to be successful and that's where using a "virtual mentor" comes into play.
The Recommended Probate Real Estate Courses on this site are written by investors who "walk the walk" and have developed highly successful investing systems. You can shorten your learning curve and avoid many costly mistakes by using a "virtual mentor." Review each recommendation, make a choice and get started in this very lucrative niche of real estate investing.
Disclaimer: This information is provided as a service and is not legal advise. Because laws vary from state to state and are subject to change, consult your own legal counsel. We make no warranty or guarantee of the accuracy or reliability of information contained herein. We assume no responsibility for any information, advice or services provided by this site or any site to which we link.
One of the best ways to make money in real estate investing is to buy probate property at a discount - with little competition.
What is probate?
Probate is the process of proving the will of a deceased person is real and confirming the appointment of the person or institution you have names to administer your estate. The probate procedure also makes sure the deceased's debts are paid, heirs are identified and located, and the real and personal property assets are distributed as instructed. Probate proceedings assure that court, attorney, executor/administrator and other costs are paid from the estate's assets.
You many have heard horror stories about probate - taking years to complete while racking up expenses. Well, often those horror stories are true. Although state laws supposedly put limits on estate attorney fees to between 3% and 5% of the estate's value, there are many expenses, which deplete estates - such as accounting fees, property management, estate taxes and property sales costs.
The result? A big opportunity for real estate investors who know how to profit from the distribution of probate assets. Statistics reveal that the opportunities are huge because each year over one million estates are probated and it takes an average of three years to probate an estate. So at any one time, there are over three million estates in the process of probate.
Why you can buy probate property for 20% to 30% below market value?
The estate must of often liquidate real estate to pay expenses, as I outlined above. If the deceased didn't leave sizeable cash assets, the executor or administrator usually must sell assets to pay ongoing costs. The result can be the sale of real estate far below market value for three main, and very motivated reasons:
1. Most heirs prefer cash to receiving real estate
2. The estate usually needs cash to pay expenses and
3. The heirs didn't pay anything for what they inherit, so they often don't demand fair market value. If the net estate is over $1,000,000 (2007 rate) federal estate taxes must be paid, too.
Not all states are equal when it comes to buying probate property
Your goal is to avoid buying at a probate sale, which must be confirmed in Probate Court. Discount pricing is more easily obtained in states that do not require Probate Court confirmation after the probate proceedings are completed. You can negotiate directly with the estate executor or administrator (advised by the estate's attorney) and the heirs. Even when court approval is not required, some estate attorneys and executors or administrators seek Probate Court approval anyway to cover their "you know what. "
So which states are the best ones to buy probate property?
4 ways to buy probate property
[1] Buy the property at a discount from the administrator --- The best way to buy probate property is directly from the estate executor or administrator without court confirmation. The heirs will need to agree to your offer, however they often just want a quick cash sale and are not too concerned about the sales prices - especially if the executor recommends they take the deal. Another thing to keep in mind is that the property is being sold "AS IS," so heirs don't have to spend money to fix up the property.
You can even ask the estate to carry a private mortgage on the property. Often the executor knows it's easier to have a local bank collect and distribute monthly mortgage payments to the heirs than to get an all cash sale.
[2] Buy the property from the heirs after they receive title to the distributed property --- Heirs would rather have cash than property along with the maintenance or fix-up costs that go along with ownership.
[3] Buy the property at a public sale --- Legal notices published in the local paper list property sales. There are a few reasons the property will be listed:
1. The deceased left no will allowing a private property sale
2. The executor or administrator and/or the heirs think a public sale will get a higher sales price
3. Court approval of the sale might be required. The property might be listed with a real estate agent and the highest bid be presented to the Probate Courty for confirmation.
[4] Buy at a public auction --- Sometimes probate property is advertised for sale at public auctions. Be aware that public auctions and sales create more competition and usually a higher sales price that may not be a bargain anymore.
How to profit from your deeply discounted probate property purchase
Now that you've successfully bought your property, how do you profit?
* Keep the property, fix it up and rent it out for long term appreciation and, hopefully, some monthly cash flow. Perhaps you can refinance it after fix-up and pull some cash out to put in your pocket or buy your next property.
* Flip the property for fast cash. You can either sell it after fixing it up for fair market value or sell it "AS IS" to another investor for a smaller profit.
Strategies for success
Whether you are a new to real estate investing or have some experience, to be successful in probate sale property investing, it's always advisable to work with a mentor. You may not have anyone in your immediate area willing to teach you how to be successful and that's where using a "virtual mentor" comes into play.
The Recommended Probate Real Estate Courses on this site are written by investors who "walk the walk" and have developed highly successful investing systems. You can shorten your learning curve and avoid many costly mistakes by using a "virtual mentor." Review each recommendation, make a choice and get started in this very lucrative niche of real estate investing.
Disclaimer: This information is provided as a service and is not legal advise. Because laws vary from state to state and are subject to change, consult your own legal counsel. We make no warranty or guarantee of the accuracy or reliability of information contained herein. We assume no responsibility for any information, advice or services provided by this site or any site to which we link.
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